The Financial Technology (FinTech) revolution is changing finance for the better globally. Driven by innovative business models designed to make handling finances more secure and efficient, start-up FinTechs are offering services that were once almost exclusively the business of banks.
FinTech companies around the world are working in “tech hubs” to develop ground-breaking new technologies that are designed to meet the specific needs of customers. These companies are able to be more nimble than the banks can. Thus, individuals and companies are starting to move away from the traditional bank to embrace FinTech innovations – such as using PayPal to pay at checkout instead of using a traditional debit card.
It’s no longer just behind the scenes technical work in the office; financial technology can now be seen in the most basic forms of personal and business finances, asset management, and payments processing. The technology that is now at our fingertips is creating companies and customers that are well-educated with high expectations. FinTech removes the manual processes that slow down payment transactions and compromise security and efficiency. Companies can now automate AP, manage loans, transfer money, make mobile payments, and more – from anywhere. Examples of this advanced technology are innovations like:
- Bitcoins – a cryptocurrency that ensures security of virtual payments, a step up from worrying about lost checks or fraud.
- Virtual cards – essentially fraud-proof and ideal for single-use transactions.
- Smartphone apps – tools used to conduct business on the go, and the assimilation of technology and finance make this possible, while costing only a fraction of traditional financial services.
The division between financial services and technology is becoming a hard line to draw. Banks currently still dominate the financial services landscape, but they risk losing that dominance without innovation, which is often limited due to legacy IT systems and operating models. Banks have the opportunity to embrace FinTech innovation to offer new solutions to their customers without having to sacrifice time and money to develop new products and services.
Even though some businesses may have reservations about financial technology, it’s not going anywhere. In fact, we’re pretty confident that you can expect to see a lot more collaboration and advancements when it comes to FinTechs and financial institutions in the near future.
Although FinTech is growing rapidly, some of the lingo can still be difficult to understand. Here’s a quick guide to some of the industry’s important terms:
API: Application Programming Interface. Software that allows for communication between two different systems in order to exchange data.
Bitcoin (BTC): A worldwide cryptocurrency and the first decentralized digital payment system that works without a central repository or single administrator.
Blockchain: Records all bitcoin transactions. A digital ledger that stores digital transactions in a decentralized location and presents each transaction as a block to the string of data.
Cryptocurrency: A virtual currency that uses cryptography to ensure security.
P2P Lending: Peer-to-Peer lending or social lending. Lenders can loan borrowers money directly.